Tax Penalty Gives Rise to Workers’ Comp Award

ALBANY, N.Y. (CN) – The shock of having to pay taxes and penalties on old travel expenses caused a “psychic injury” that triggered workers’ compensation benefits, a New York appeals court ruled. Bernadette Brittain’s job in human resources for the New York Insurance Department in Albany required her to make frequent trips into Manhattan, but the department covered her travel and lodging costs. When an anonymous complaint led to an investigation of her expense claims, the state inspector general found no wrongdoing but referred the case to the Comptroller’s Office for an assessment of the tax implications of the department’s reimbursement practices. The office concluded the practices violated Internal Revenue Service rules and caused Brittain to earn an additional $100,000 in income. Told of her responsibility for back taxes and penalties on the extra income, Brittain suffered a “psychic injury” for which she sought workers’ compensation benefits. Concluding that Brittain had a compensable injury in 2011, the state Workers’ Compensation Board rejected claims from the department’s insurance carrier that state law barred her claim. A divided four-justice panel of the Appellate Division’s Third Judicial Department in Albany affirmed Thursday. “There is no dispute that she incurred a psychic injury upon learning of the comptroller’s findings,” Justice William McCarthy wrote for the majority. These mental injuries did not stem, however, from work-related stress, which does not qualify for benefits, but from “the serious financial liabilities she incurred as a result of a review of the employer’s reimbursement practices,” McCarthy added. Key to that was the finding that Brittain had done nothing wrong. “Inasmuch as that audit was not ‘aimed at’ claimant, substantial evidence supports the board’s determination that her resulting mental injury was not the direct consequence of a disciplinary action or work evaluation,” the ruling states. In a brief dissent, Justice John Egan Jr. called the inspector general’s investigation the “genesis” of Brittain’s claim for workers’ compensation. That made it necessary to evaluate the claim against the backdrop of “lawful personnel decisions” – such as disciplinary action, demotion or job transfer – which don’t qualify as compensable psychic injuries under state law, Egan added. The judge also said he was “not persuaded” that Brittain’s stress “was greater than that incurred by similarly situated workers in a normal work environment.” People receive distressing news at work every day, he said. “While such bad news, in turn, may prompt an employee to become sufficiently upset to walk out of his or her workplace and never return, it does not necessarily entitle the employee to workers’ compensation benefits and, in my view, an award of benefits is not warranted here,” Egan wrote.